Institutional investors are showing a clear preference for residential real estate and infrastructure segments in a changing investment environment. This is according to PATRIZIA's sixth global investor survey, which included over 100 institutional investors with assets under management of up to one trillion Euros. The survey notes that investors are placing their trust in markets characterised by robust demand, long-term structural trends, and stable cash flows.
The current market situation, marked by increased financing costs and geopolitical uncertainties, is leading to a more disciplined capital allocation. This particularly affects real estate and real assets. Within the real estate sector, residential properties, including specialised housing such as student and senior accommodation and affordable housing, remain the preferred segments. A significant 77 percent of respondents plan to expand in these areas over the next five years. Among these, 40 percent of investors consider classic residential real estate to be particularly attractive, followed by affordable housing at 34 percent.
Jochen Reith, Head of Capital Markets DACH at PATRIZIA, highlighted that the fundamentals of many European real estate markets have been better than market sentiment for years. Investors favour sectors with strong, long-term demand and resilient cash flows, which is why residential and specialised housing segments are particularly valued. A structurally low supply, demographic developments, and the need for modern residential properties consequently create compelling, long-term investment opportunities.
Infrastructure in Investors' Focus
At the same time, interest in infrastructure investments is growing significantly. Almost half of the respondents (45 percent) intend to increase their allocations to infrastructure over the next five years. This underscores the attractiveness of long-term infrastructure investments for institutional investors. There is particular interest in infrastructure for energy security and digital infrastructure solutions, with 41 percent of investors planning to expand their positions in the energy transition sector. Social infrastructure recorded the strongest growth compared to the previous year, at 17 percent.
Janin Söder, Head of Infrastructure Sales DACH at PATRIZIA, noted that the energy transition is increasingly being viewed through the lens of resilience and security of supply. This is leading to an expansion of the investment focus beyond pure energy generation to include infrastructure for energy security, as well as decentralised systems and digital infrastructure. Local investments are gaining importance as the demand for resilient, Europe-wide distributed networks grows. She is convinced that this market situation is advantageous for investment managers with clear local expertise, as many of the most attractive investment opportunities are closely linked to the local economic situation and require a deep understanding of regional developments.
Geopolitical Uncertainty and Europe as a Stable Market
Geopolitical volatility significantly influences the investment strategies of institutional investors, with around 85 percent of respondents noting a moderate or significant impact on their real asset portfolios. This leads to a more selective approach in choosing asset classes, geographical locations, and investment partners. Europe confirms its position as a preferred destination for long-term investments. Nearly one in four investors (24 percent) plans to expand their investments in Europe over the next three years, while only four percent intend to reduce them. Investors also prioritise active asset management strategies, such as refurbishments and ecological renovations, to safeguard the value and future viability of their portfolios and respond to changing requirements. The majority of respondents (around two-thirds) aim to expand their allocations to Core and Core+ approaches, which underlines the focus on resilient sectors and high-quality assets.
